I-T Department Simplifies Capital Gains Tax Structure

The income tax department has issued FAQs on changes in capital gains tax to simplify the tax structure and promote ease of compliance. The holding period for various asset classes has been rationalized, with adjustments in tax rates for short-term and long-term capital gains. Effective July 23, the new rules aim to benefit taxpayers.

The income tax department on Wednesday issued FAQs explaining changes in the capital gains tax to simplify the tax structure and promote ease of compliance.

The holding period for various asset classes for short- and long-term capital gains tax has been rationalized.

The holding period of all listed assets will now be one year for long-term capital gains tax (LTCG). Therefore, for listed units of business trusts (ReITs, InVITs) the holding period is reduced from 36 months to 12 months.

The holding period for gold and unlisted securities (excluding unlisted shares) is also reduced from 36 months to 24 months for LTCG calculation. The holding period for immovable property and unlisted shares remains at 24 months.

Effective July 23, the rate for short-term capital gains tax on listed equity, equity-oriented mutual funds, and business trusts units has increased from 15 percent to 20 percent.

The long-term capital gains tax rate for these assets has increased from 10 percent to 12.5 percent, with the exemption limit rising from Rs 1 lakh to Rs 1.25 lakh.

There is no change in short-term capital gains tax (STCG) on other assets like gold, property, listed and unlisted bonds, and debentures, which will be taxed at slab rates.

The LTCG tax rate will be 12.5 percent for all asset classes except unlisted bonds and debentures, taxed at slab rates. No indexation benefit will be available for the real estate sector. The reduced rates aim to benefit all asset categories, though benefits for gains limited by inflation may be marginal or absent.

(With inputs from agencies.)